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Strategic ambiguity in global games

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  • Ui, Takashi

Abstract

In games with incomplete and ambiguous information, rational behavior depends not only on fundamental ambiguity (ambiguity about states) but also on strategic ambiguity (ambiguity about others' actions), which further induces hierarchies of ambiguous beliefs. We study the impacts of strategic ambiguity in global games and demonstrate the distinct effects of ambiguous-quality and low-quality information. Ambiguous-quality information makes more players choose an action yielding a constant payoff, whereas (unambiguous) low-quality information makes more players choose an ex-ante best response to the uniform belief over the opponents' actions. If the ex-ante best-response action yields a constant payoff, sufficiently ambiguous-quality information induces a unique equilibrium, whereas sufficiently low-quality information generates multiple equilibria. In applications to financial crises, we show that news of more ambiguous quality triggers a debt rollover crisis, whereas news of less ambiguous quality triggers a currency crisis.

Suggested Citation

  • Ui, Takashi, 2025. "Strategic ambiguity in global games," Games and Economic Behavior, Elsevier, vol. 149(C), pages 65-81.
    • Handle: RePEc:eee:gamebe:v:149:y:2025:i:c:p:65-81
    DOI: 10.1016/j.geb.2024.11.004
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    More about this item

    Keywords

    Strategic ambiguity; Global game; Currency crisis; Debt rollover crisis; Incomplete information; Multiple priors;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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